In its International Energy Outlook 2008 released in July, the Energy Information Administration (EIA) projects two very different futures for global energy markets. The more likely scenario predicts world oil prices of $186 per barrel in 2030, a historically high level that would dampen worldwide growth in energy demand while stimulating development of previously uneconomical energy sources.
EIA lays out a "reference case" in which it is assumed that "current laws and policies remain unchanged" through 2030, as well as a "high-price case" designed to reflect the uncertainty associated with long-term projections of future oil prices. The $186-per-barrel price is 65% higher than $113 assumed in the reference case for the year 2030. "Given current market conditions," EIA reports, "it appears that world oil prices are on a path that more closely resembles the projection in the high-price case than in the reference case."
Several factors are cited by EIA as contributors to the current rise in oil prices:
- growing demand in Asia and the Middle East
- lack of increased production by OPEC members
- rising costs to explore and develop new oil sources
- increases in commodity prices
- weakening U.S. dollar.
The agency's reference case predicts prices will fall to $70 per barrel by 2015 as new production reaches the market, and then steadily rise to $113 (equivalent to $70 in inflation-adjusted 2006 dollars) by 2030. By contrast, the high-price case assumes an uninterrupted 25-year rise to $186 per barrel.
Under the reference case, world consumption of liquid fuels would increase to 112.5 million barrels per day by 2030, compared to only 99.3 million under the high price case. Yet since both cases assume a long-term rise in oil prices, then unconventional resources such as oil sands, extra-heavy oil, biofuels, coal-to-liquids and gas-to-liquids should become more economically competitive. The reference case predicts global production of these unconventional resources will quadruple from 2.5 million barrels-per-day in 2005 to 9.7 million in 2030, thus accounting for 9% of total world liquids supply. The U.S. would supply nearly half of the world's biofuels, or 1.2 million barrels per day, in 2030.
But EIA continues, "The composition of supply differs substantially between the reference and high price cases." In the latter case, by 2030 unconventional sources would account for nearly 20% of global liquids supply—or double the 9% projected in the reference case. The percentage growth would also be due in part to falling conventional production. While the agency's reference case predicts conventional supplies would increase 21 million barrels-per-day between 2005 and 2030, the high-price case sees a decline of 1.5 million.
The EIA reference case makes a number of other predictions: World energy consumption will grow by 50% between 2005 and 2030, but only 19% among member countries of the Organization for Economic Cooperation and Development (primarily North America, Europe, Japan and Korea). Instead, increases will be driven primarily by an 85% rise in energy consumption among non-OECD nations. Altogether, the economic activity of these nations will grow at an annual average of 5.2%, compared to 2.3% for OECD countries.
Also under the reference case, EIA projects worldwide increases in consumption of non-liquid energy sources: natural gas consumption would rise from 104 trillion cubic feet in 2005 to 158 trillion cubic feet in 2030; coal consumption from 123 quadrillion to 202 quadrillion BTUs; and net electricity generation from 17.3 trillion kilowatt-hours to 33.3 trillion. Nevertheless, EIA points out, "The outlook for fossil-fuel-fired generation could be altered substantially by international agreements to reduce greenhouse gas emissions."
To view the complete International Energy Outlook 2008, click here.